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Keys to Long-Term Investing
Do the ups and downs in the financial markets bother you?
If you answered yes, you're not alone. The recent turmoil has created uncertainty and anxiety for many investors.
Especially those who haven't experienced a bear market - witnessing only very short-lived market downturns.
Relieve your stock market jittersConsider these three tips for long-term investing: focus on the long-term, invest regularly and diversify.
Focusing on the long-term If you watch the ups and downs of the market over a short time period, you'll often see large fluctuations. But if you watch the markets over a longer time, you'll find the movements much less dramatic. The key is not to become too overly concerned with the movement of the market in one-or even two-year periods, if your investment time horizon is at least five to seven years. History has shown that the longer you remain invested, the greater your chances for success.
Investing regularly and consistently Doing so will let you take advantage of swings in stock prices. When stock prices decrease, you purchase more shares and when prices are higher, you purchase fewer shares. Though no investment program can assure a profit or protect against loss, investing consistently can help you ride out market ups and downs. Dollar Cost Averaging involves continuous investing. Investors need to consider their ability and willingness to continue investing through periods of low price levels.
Diversification Don't put all your eggs in one basket. Instead consider spreading your risk by dividing your money among a variety of asset classes - stocks, bonds, etc. This way, if one investment performs poorly, it only affects part of your total investments. Keep in mind that no investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values.
While you have no control over how much the value of your investments change, your understanding of these three keys should help you make it through the tough times.
Written By: Helen Hou, Hou Financial Group
Asset Allocation Model from Helen Hou